Brexit Negotiations Thus Far – Quo Vadis, Britain?

Mathias Cheung discusses some of the key takeaways three and a half months into the Brexit negotiations:

Progress has been slow in the past four rounds of negotiations, and trade talks may well have to be pushed back.

Citizens’ rights remain at the top of the agenda with no consensus just yet, which may impact on the construction industry.

The Repeal Bill is now in the committee stage, and amendments are likely to impact on the fate of current EU legislation relevant to construction projects.

Renewed impetus is needed to ensure the industry’s concerns are taken into account when reaching the Brexit deal.

As we return from the blissful oblivion of the summer break, let us recap what has happened with the Brexit negotiations since they kicked off with the opening round on 19 June 2017. Despite the apparently structured process (see figure below) laid down for each round of talks, it is by no means an easy task to gauge the actual progress made – indeed, the negotiations have taken such a sluggish pace over the course of summer that various political quarters, including the Maltese Prime Minister, thought at one point that Brexit may not actually happen.

The keen observer would no doubt recall reports during the second round of talks in July that ‘limited progress hasbeen achieved in negotiations’ according to EU spokespeople and negotiators, and that trade negotiations may have to be delayed. This setback was almost inevitable given the ongoing split between the EU and the UK on immigration and citizens’ rights, particularly the UK’s rejection of any supervisory or transitional role for the Court of Justice of the European Union (CJEU). The Brexit Secretary David Davis summarised the second round in his letter to the Lords EU Committee as ‘difficult, but ultimately productive, discussions’, alluding euphemistically to an emerging conflict on proposed restrictions on onward movement to other Member States by Britons currently living in the EU.

The impasse came to a head in the third round of talks at the end of August, when the EU’s chief negotiator Michel Barnier reported that the discussions ended with ‘no decisive progress’, particularly on the three key issues of citizens’ rights, the Northern Ireland border, and the so-called ‘divorce’ bill. The UK proposed a ‘temporary customs union’ to ensure ‘frictionless trade’ whilst negotiating new trade deals around the globe, but this was met with something less than a cold reception in the EU. Add the colourful exchange in the European Parliament between Jean-Claude Juncker and Nigel Farage about who will ‘regret’ Brexit more, and you have here the perfect storm.

The Prime Minister Theresa May notably tried to break the deadlock in her keynote speech in Florence on 22 September 2017, striking a more conciliatory tone by proposing a ‘deep and special partnership’ in long-term projects, with a potential transition period until 2021 based on the current terms of the single market and a new registration mechanism for EU citizens migrating to the UK. This was welcomed by Michel Barnier who called for ‘a moment of clarity’ on the UK’s position, but European Council President Donald Tusk warned during a visit to London that ‘there is not sufficient progress yet’.

As both sides came out of the fourth round of talks at the end of September, it remained dubious whether trade talks could commence as originally planned. Whereas David Davis characteristically referred to ‘decisive steps forward’, Michel Barnier considered there to be ‘big gaps’ on key withdrawal issues which could take ‘weeks or months’ to bridge – not surprising at all given the clear stumbling blocks of citizens’ rights and the future role of the CJEU.

The continuing difficulties were confirmed by the overwhelming vote in the European Parliament on 3 October 2017 to postpone any decision to start trade talks, which was meant to be determined at the next EU27 summit on 19/20 October 2017. In an interview with Sky News on the same day, the Prime Minister played down the EU’s apparent stance by insisting that trade talks have to happen ‘at some point’. However, it is not so clear-cut when one considers the EU’s adamant dismissal of attempts at cherry-picking, and as the Economist observed back in June, ‘better times in the EU [due in part to the victory of Emmanuel Macron in France and Angela Merkel in Germany] will not make European leaders any readier to bend the rules to accommodate the Brexiteers’.

The lack of progress is, moreover, not helped by the incursions into Brexit policy by Foreign Secretary Boris Johnson (et tu, Boris?) in two fiery articles in the Telegraph and the Sun respectively, which many saw as Tory infighting close to the stuff of Michael Dobbs’ House of Cards. This ‘frolic of his own’ has served to confuse and divide, when what is really needed in Westminster is a stable leadership, an unambiguous negotiating position, and the flexibility to reach sensible compromises.

The Prime Minister has tried to brush all this aside in her speech at the Conservative Party Conference (which was not without a few unscripted hiccups) by calling for unity, but as former Justice Secretary Ken Clarke remarked in an interview with BBC Radio 5, the conference was inevitably overshadowed by a sense of ‘mayhem’ due to the recent controversies.

So where does this all leave us? It seems that the negotiations have been struggling to avoid the potential complications and delays which I have flagged up in the wake of the snap election. The Prime Minister is slowly warming to the idea of transitional periods and continuing access to the single market, but whether this would ultimately lead to a soft(er) Brexit is still speculative, and businesses should take legal precautions and not make any assumptions (see my previous article on managing skills shortages).

All eyes in the construction and infrastructure industry will be on the progress made on citizens’ rights and the outlook for labour resources. Equally, the Repeal Bill, which has cleared the second reading stage, will be going through line-by-line scrutiny in the committee stage, and the amendments proposed will affect the post-Brexit regulatory landscape, particularly when and how we can expect construction-related EU legislation to change.

As the UK and the EU enter the fifth round of talks, one cannot help but wonder: quo vadis, Britain? One hopes that the answer is not ‘to be crucified again’. What the past six months have clearly shown is that the industry cannot take its eyes off the ball, and as rightly noted by Construction News in a recent editorial, renewed impetus is needed to ensure that the industry’s concerns are properly taken into account in the Brexit equation.

Mathias’ practice covers all areas of Chambers’ work, including construction, engineering and infrastructure, energy and utilities, information technology, and professional negligence. In addition to these specialist areas, he has gained experience in a wide range of commercial disputes, including cases on fraud, insurance, assignment, subrogation, and conflicts of law. Mathias is also the winner of the SCL Hudson Prize 2015 for his essay entitled ‘Shylock’s Construction Law: the Brave New Life of Liquidated Damages?’.

As a native of Hong Kong, Mathias is fluent in both Cantonese and Mandarin, and he is therefore able to take instructions for cases involving Chinese-speaking parties and Chinese documentation in Hong Kong, Mainland China, Singapore and other jurisdictions.